Ever since Kindle Fire was released on the 14th of November, the reviews seem to be evenly split between Amazon and Apple. Some people would say that Kindle Fire falls short of iPad in almost every aspect which is deemed to be a driving factor for Apple iPad to increase further its customer base. However, half of the reviews also see that the Kindle Fire tablet is providing a solid user experience with a cost effective price point which opens a whole new market for tablet users.
Analyst are seeing a huge potential in Amazon’s Kindle Fire which is estimated to have its shipments reach over five million units worldwide. Scott Devitt, analyst for Morgan Stanley believes that Kindle Fire possesses a huge potential and this also offers a huge boost for Amazon because it will serve as a handy portal for customers to access the vast catalog of Amazon’s content. According to Devitt in is report, “The Kindle Fire is a strategically misunderstood asset that will drive incremental sales and gross profit dollar conversion. We view Kindle Fire as a similar scenario to the original Kindle eReader launch in November 2007.”
Devitt further said that “…many ‘tech-spec jocks’ and hardware reviews have applied a one-dimensional evaluation of the Kindle Fire. However, we argue that Amazon has created an entire content ecosystem and operating system platform that supports the Kindle Fire, making it a better value proposition than any other Android-based tablet on the market.” Even with lighter specs, the Kindle Fire makes it up with a very compelling price point of less than two hundred dollars.
The content environment combined with Amazon Prime will certainly be a huge boost for the company and in line with Devitt’s analysis; it could enhance the earnings of Amazon of up to six billion dollars by 2013. At the moment, even if Kindle Fire hardware is sold at a loss, which has been the focus of attention for most of the technology media, it is actually a part of much wiser play for Amazon.
The negative gross profit contribution of Kindle Fire could be part of a well played strategy to compel content availability and user adoption which will benefit all the parties involved. In order to gain control in the monetization aspects of Kindle Fire, Amazon has to drive the flow of content and the only way to do this is to offer the device at a very appealing price point of $199 which in turn will also facilitate consumer adoption. Kindle Fire app developers on the other hand will have a real incentive in producing content for Fire owners due to its big installed base.